Ladies and gentlemen, welcome to the Cicor Annual Media and Analyst Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants have been listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star one on your telephone. For operator assistance, you may press star zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Alexander Hagemann, CEO. Please go ahead, sir.
Thank you very much, Sandra. Good afternoon, ladies and gentlemen. Welcome to our 2025 Annual Results Conference. Yeah, like usual in previous years, together with Peter Neumann, our CFO, I will give you some of the background and present the results to you. 2025 has been a very busy year, a year in which we have made significant progress towards becoming the Pan-European leader in our chosen markets by adding France, by adding Spain, and by further strengthening our position in aerospace and defense. That was a very high level of activity, and that level of activity also led to very significant one-off costs related to the M&A. As you will see later, we are making adjustments so that underlying performance can be viewed properly.
All this before the backdrop of a challenging macroeconomic environment. I'm sure we'll be talking about that. With what we have achieved in 2025, a foundation is laid for a strong 2026. In short, Cicor has truly become one of the leading design and manufacturing partners for advanced electronics in Europe. With sales of CHF 660 million, we have grown 28%. Order intake has grown even stronger, 46.5%, leading to book-to-bill rate of 1.05. The underlying EBITDA was increasing significantly to CHF 65 million, a margin of 10.5%. Very noteworthy, again, an exceptionally strong free cash flow, which has reached 76% of Adjusted EBITDA as the result from very effective network and capital management.
Peter will go into detail and explain how we have achieved this. Cicor today is one of the leaders in aerospace and defense, number two in Europe. With that, we have created a platform that gives us leverage for organic growth. Our focus are markets in applications that matter, where lives or high-value assets are depending on the functioning of the long term of the products that we do manufacture. That is the foundation for growth and the core of our strategy. The focus on high mix, low volume to those demanding markets. Since 2020, Cicor has achieved 6.3% annual average sales growth, and therefore we have outgrown the European EMS market significantly. That market has grown approximately 4% annually.
For example, in ejection seats, Cicor has a market share of 80% supplying electronics to ejection seats for the free world. In hearing aids, Cicor technology is included in one out of two hearing aids worldwide. In industrial applications, Cicor supports the manufacturing of the most advanced semiconductor equipment. Another key element of our strategy for is to supply in a Pan-European footprint plus global manufacturing offerings. The M&A activity of the last year has enabled this. Today, Cicor has access to more than 70% of the European electronics OEMs by regional presence, that indeed is a foundation for growth. Today in our industry, what is needed are tailor-made manufacturing solutions, manufacturing in the customer's country, nearshoring solutions or local for local manufacturing like we provide in China and the US.
Talking about our market segments that we are focusing on most, starting with aerospace and defense. In earnest, we have entered that market in 2021 with our first acquisition. Today, 2/3 of the leading European defense integrators are amongst Cicor customers, that is a foundation for growth to come. That also provides stability, not depending on only a few core customers, but very broadly based. We are serving today more than 30 of the leading OEMs in that market, as already communicated in earlier events, we are in the process of onboarding two more. More will be reported about in the Q1 update. That market segment has grown more than eight times in the past five years, leading to number two position in Europe. Second strategic market is the advanced healthcare technology segment.
It is a unique combination of capabilities that we are able to offer, and we are accelerating our organic growth as contract development manufacturing organization. The business to that market has doubled over the past five years, out of which the majority of that growth has been organic. Today, Cicor has achieved number three position in Europe and expanded the reach through the acquisition of our Morocco and U.S. sites, which are specifically focused on medical application. In the industrial market, Cicor is driving automation and miniaturization. Here, as mentioned earlier, we have access to the majority of European OEMs, providing us a platform for solid organic growth in the years to come. That business has grown about 2.5 times over the past five years, which was a mix of organic growth and M&A.
Our market position is constantly evolving. If Cicor was still number 10 in Europe in 2024, in 2025, we already achieved number six market position. That gives us the customer outreach, but also the scale and manufacturing to provide competitive solutions while delivering solid profitability. Let me now talk about the highlights of Cicor in 2025. Number one, the trans-European, I have to say, the only pan-European peer in our industry. At the same time, as mentioned before, climbing the ladder in target segments. Five strategic acquisitions were completed, and I'll talk about those in a minute in more detail. We have achieved record-adjusted EBITDA, albeit with some temporary margin dilution. However, while creating significant shareholder value, and Peter will go specifically in details about that.
We have accepted that temporary margin dilution because we have acquired strong underlying customers, robust operations, and management teams. The strong free cash flow generation, 76% cash conversion of EBITDA, did not only strengthen our balance sheet and deleverage the company, but also supporting growth strategy for the years to come. As mentioned earlier, we have strengthened our market position as the leading European partner for high reliability electronics. Let us go one level down into detail. Talking about target markets. The industrial segment saw robust growth, 48% in revenue over previous year. With positive organic growth, in that segment we had seen the worst already in the first half of 2025, plus mergers and acquisitions and all that growth from a very high base already.
Aerospace and defense, our second-largest market, saw solid growth of 30%. That was driven by M&A, combined with some organic growth. However, it needs to be noted that due to the nature of the aerospace and defense business, it takes a delay of roughly 12 months before order intakes are converted into sales. We are hopeful and optimistic that the high order intake in 2025 will allow us to deliver significant organic growth in 2026. The medical market saw a small growth of 4%. Here we had still negative organic growth, which was the result of two customers of the AS division destocking, as we have reached the trough of the cycle. In sales by region, all regions have grown. Asia has grown 9% via organic growth.
The Americas have grown by 25%, which is also the result of our M&A activities, not only Valtronic in Cleveland, which was with the group for a short period of time, but also MADES of Spain, which has significant exports to U.S. defense customers. The focus on Europe, which had been strategic all the time and all over the years, is broad-based. You do not only see Switzerland as a strong market, but U.K. as our number one market, Germany, about the same size as Switzerland, and France, strongly coming up. Here I have to mention that our French business only joined the group in end of April. Let me make comments about the 2 divisions. Most important was that the EMS division has returned to growth, albeit at very, very small growth.
This, however, was in a declining EMS market, where we still saw in Europe, a 1.3% decline. Again, Cicor has gained market share, although these market share gains have been a bit smaller than in 2024, where Cicor had gained significantly. As a result of the organic development and M&A activity, sales have increased by 1/3 to CHF 584 million. The Adjusted EBITDA margin was solid, and it demonstrated the operational discipline in all our existing businesses, while we have accepted a temporary margin dilution after the acquisition of Éolane. As mentioned, Cicor has further gained market share, and at the same time, we have continued on our strategic move towards becoming a contract development and manufacturing organization. In the meantime, Cicor employs 400 engineers, out of which half are in research and development.
The strong order intake in aerospace and defense, especially in the second half of the year, supports future growth to come this year and thereafter. The AS division on the other hand, had seen sales reduced significantly by 22% to CHF 35 million. This leads to a share of group sales of a bit below 6%. As mentioned before, that lower demand was exclusively driven by two medical device customers that at the same time have reduced their inventory levels, a temporary effect of which we expect that it will return. The cost structure was improved, and that improved cost structure allowed still an acceptable EBITDA margin of 10.8% despite the strong top line reduction, and at the same time, will enable significant margin expansion when growth will return.
That strong growth is expected because not only these two medical customers have normalized demands, we also see specifically high demand from aerospace and defense customers. What we have done is a significant improvement of our cost structure, both by improving operational excellence further at the Boudry site for printed circuit boards and the consolidation of the Ulm site for hybrid substrates into the Wangs, Switzerland site, where now 100% of manufacturing takes place. Let me say a few words about strategy, here I won't go into detail because we had various occasions where strategy was already discussed. For now, we are leaving the financial objectives that you see on this slide unchanged. We will, however, during the year review and potentially revise these objectives. Why will we do this?
Because the progress has been faster than expected towards reaching the objectives of 2028. We have made significant progress in M&A, in our very value accretive approach to M&A, therefore, we have a good and solid look on these midterm targets. Again, the three core elements of strategy are the already mentioned focus on applications that matter. Aerospace, defense, healthcare, technology and industrial. Our pan-European market access, which is very unique in the industry, none of our peers is following that route. Our focus on high mix, low volume at scale, where we manage complexity of our customers and are well paid for that, giving not only customer retention, but also higher margins than in the average of the industry. Talking about M&A, we have started our journey on M&A in December 2021.
It is only a few years, four years actually, of M&A, and we have completed 5 transactions last year. We see all these as value accretive. We are seeing that they are serving our core strategic interests, have a good industrial and financial fit to the business, and what that means, I will briefly explain. We have started in the year in with the integration of Profectus in Germany, giving us in the Thuringia region of Germany a strong footprint, mainly in the industrial sector. In the meantime, we have consolidated the management team in Thuringia and have created a very strong base for organic growth in Germany. We have continued with the acquisition of Éolane in France, the French perimeter of Éolane, including the Moroccan sites, out of a court-administered bankruptcy process. That transaction was completed.
It gave us a very strong market position in France, especially in the high-end markets of aerospace defense, railway infrastructure and nuclear power, plus Morocco as an excellent nearshoring option for our various customers. We continued with the carve-out, carving out a Geneva site out of Mercury Systems, completed in June, at the same time establishing a strategic supply relationship with Mercury. That strategic outsourcing project allows Mercury to focus on their core competence, while Cicor will support the company over the long term.
We are in the process of transferring production to our Cicor sites in the U.K. and Switzerland to provide not only volumes and flexibility, but also optimized costs. The acquisition of MADES in August was a very important milestone because with MADES, we have acquired the leading Spanish provider of electronic manufacturing solutions for the aerospace and defense sector, including strong connections into the U.S. defense industry. It is, you can see Spain as a niche market, which it is, but a highly attractive niche market because of the very fast-growing business in aerospace and defense. We ended the year with a very small acquisition of the Morocco and Cleveland, U.S. sites of Valtronic, very focused on the medical sector and marking the market entrance in the U.S.
That has been a very strong pipeline that we have completed, and how that's resulted in numbers, Peter will explain now.
Thanks a lot, Alexander. Please let me now lead you through some more details. Before diving into the specifics of 2025, I want to take the long-term view and explain some of the dynamics. Let me start with the overview and our key figures from 2022 - 2025. As you can see, we have introduced the concept of adjusted profitability. Background is that with the increased level of M&A activities, we want to provide a more transparent view on underlying business dynamics, excluding one-time M&A effects. In 2025, we had, with the abandonment of the TT Electronics transaction, the acquisition of Éolane out of administration and other transactions, significant one-time effects adding up to CHF 8.4 million on EBITDA. I will explain more in detail those later.
Now, looking at the trends over the past three years, we nearly doubled in terms of Adjusted EBITDA and tripled in adjusted net earnings. You can nicely see how we have been driving free cash flow generation with CHF 110 million just in the past two years. For our M&A strategy, this is super important as this creates an extremely solid financial base and provides us financial flexibility to continue to go after attractive M&A opportunities moving forward. This leads over to the next chart. On the left, you see the growth capturing organic and inorganic growth. There we are clearly the fastest-growing listed EMS. On the right, you see the corresponding leverage levels looking at net debt to EBITDA.
The really important thing is that we have been growing by M&A but did not fall into the trap of acquiring companies increasing gradually leverage and net debt. We have maintained our net debt levels always at moderate leverage of 0.7-1.4 in the past four years. Key success driver for this is our ability to integrate the acquisition fast and delivering strong free cash flow with our operational excellence program. In the next chart, I will explain this more in detail. In this chart, you can see the absolute free cash flow in CHF millions in blue. On top, you can see also the free cash flow as % of EBITDA as line, so the free cash flow conversion. In the purple line, you can see that free cash flow to EBITDA excluding net working capital changes.
As you can see, this line has been really always around 50%. That is also our long-term objective. Now, in yellow, you see the total free cash flow delivery, including net working capital changes. You can see nicely that in 2021 and 2022, during the supply chain crisis, we had negative impacts. On the other hand, you see that in 2024 and 2025, we have successfully brought down operating net working capital. Over the past two years, we delivered a record free cash flow of CHF 110 million. What I think is really nice also with the acquired companies contributing over-proportionately to these excellent results. This leads nicely over to our M&A execution. In this slide, you see, in dark blue, the revenue of acquired companies measured as last 12 months revenue pre-completion, all at current FX or 2025 FX rates.
In yellow, you see the net cash out for these acquisitions. Again, it's just an indication on the purchase consideration, the net cash outline. We usually pay considerations based on historic backwards-looking profitability. If you look at all the transactions from 2021 - 2024, we have acquired around CHF 210 million of revenue, average multiples 5x-7x, and EBITDA margins being in line, or EBITDA margins in line to the Cicor average. Hence, we had limited margin dilution. As you can see, now for 2025, we acquired with five transactions, CHF 221 million, paid a very, very low purchase consideration and a cash out of CHF 50 million, significantly below historical values.
Core reason is that the transactions were special situations or opportunities with Éolane, as Alexander nicely showed, being the largest one as we acquired this business out of administration. The opportunity is that we now gradually bring these transactions to Cicor margins. Please let me elaborate more on this opportunity longer term and the short-term margin impacts in the next slide. In this chart, you can see in light blue the revenue of the 2025 acquisitions. In dark blue, the base business, including the 2025 transactions. Looking at the dark blue, we maintained around 12% Adjusted EBITDA margin, with 2025 being negatively impacted by RS in Germany. Our base Cicor business is maintaining a strong profitability and continues to progress as we go into 2026. The light blue reflects the 2025 acquisitions when on an adjusted basis, delivered in 2025 mid-single-digit EBITDA margins.
We progress in terms of EBITDA margins in 2026 and in average, we are again at mid-single-digit %, but we progress to high single-digit % margins going out of 2026. On the top, you see it in the pie chart, the percentage of this impact of the light blue ones is increasing, and it has a mixed impact that brings the average, taking the midpoint margin from 10.5% - 10.3%. The value creations that we bought these companies at very low purchase consideration and now gradually bring them to Cicor margins. Here, from 2025 - 2026, you see that both dark blue and light blue progress respectively on margins. After some of these introductions, let me now dive into the details of 2025.
In 2025, we had a very strong order intake with a book-to-bill of 105. Net sales up 28%, with M&A contributing 32% and FX and organic being negative with 2% respectively. We introduced the concept of adjusted numbers that exclude one-time M&A impacts for EBITDA. As you can see, the difference in EBITDA is CHF 8.4 million, and on Adjusted EBITDA, we progress from CHF 60.7 million to CHF 64.6 million, with a diluted EBITDA margin of 10.5%. On Adjusted EBIT, we remain stable at CHF 47 million, and net profit is declining by 5%, mainly due to FX impacts that are one time in nature. On a free cash flow, we again significantly surpassed our 50% conversion.
The free cash flow generation of CHF 110 million for both 2024 and 2025 give us a very solid financial base. As mentioned, we are providing reported and adjusted performance measures for 2025 and the previous years. All is detailed out in the annual report and in the appendix of this presentation. You can see that 2025 marks a record in terms of M&A activities and hence some of these one-time effects, hence the need to really transparently disclose them. For 2025, we had the write-down of the TT transactions. It was CHF 4.4 million on EBITDA. We had acquisition costs linked to buying Éolane out of administration. We disclosed this in the first half of CHF 2.5 million.
We had standard purchase price allocation, fair value adjustments, and we had some selective, one-time restructuring reorganizations to drive productivity. Looking now at adjusted numbers, at EMS, Alexander has been nicely explaining some of the dynamics. EMS is really the majority of our business, is 95%. All of the 2025 transactions have been in EMS and hence you see the margin dilution. EMS had a solid year, and we are building market share in a declining market. AS is only around 5% of our Cicor sales and declining, 22% on a reported basis. Alexander explained the reasons with the two major healthcare technology customers driving inventory optimization and obviously the softer end market demand in hearing aids. Let's now looking at our profit and loss statement. I already explained EBITDA margin dilution and the one-time EBITDA adjustments.
Maybe some words on financial results and specifically the net FX result. With the Swiss franc strengthening, we had in 2025 a negative one-time impact of CHF 3.3 million versus a positive impact of CHF 1.4 million in the previous year. It's a year-over-year impact of CHF 4.7 million. On the financial result, you see the well, refinancing costs with the SARON going down and giving us CHF 1 million less of costs. If you look at the sales contribution, as mentioned, 32.5%, M&A, FX and organic 2% respectively negative. If we would have consolidated all completed transactions from beginning of the year, our revenue would have been CHF 75 million higher and our current or underlying business all in twelve-month basis would have been CHF 691 million in 2025.
As usually, M&A results are reported with some delays. I think it's important to understand what is the real underlying size of the current business. Balance sheet, net debt increased as we financed some of the transactions, our leverage continues to remain very moderate with 1.1. Cicor is clearly in a strong position to continue its growth strategy, as in the midterm target set, we want to remain below 2.75. Cash flow. Here you see CapEx with CHF 12.6 million and the cash out, the net cash out for the transactions of CHF 50 million, CHF 49.9 million to be precise. Important, the free cash flow excluding M&A of CHF 49 million, that basically funded the net cash outflow for the transactions.
As mentioned, we expect free cash flow excluding acquisitions to be around 50% of EBITDA in the long run. Operating net working capital, we reached 22.3%. Our operational excellence program work and have been driving significant improvements. We have set ourselves now a new goal for 2028 to achieve operating net working capital below 20%. CapEx. The CapEx, we remain with 2.3% below our midterm goal, and we are obviously very selective in driving automation and productivity of our CapEx investments. We are not a high CapEx industry. Return on invested capital remains a key measure for us, and we target to achieve above 15% midterm. We show in this graph both reported return on invested capital as well as adjusted ROIC. In 2025, we maintained adjusted EBIT on a rolling basis stable.
You see this here, CHF 48 million-CHF 47 million. Had higher invested capital with the completion of the five transaction that created a significantly more sizable business. As we are progressing on margin improvements, this will drive Adjusted EBIT and therefore also ROIC back up towards our midterm goals. Looking at our share structure, most importantly, 99% of the mandatory convertible bond are converted ahead of the mandatory conversion 27. We have a very simple capital structure with 4.4 million shares outstanding. On earnings per share, I would like to rather go straight to the next chart where you can see the long-term trend. With our growth strategy, we have been building long-term value and adjusted earnings per share.
If you exclude one-time FX impacts for 2025, we would have again progressed in terms of earnings per share and nicely been developing from CHF 2.85 to above CHF 8 over the last five years. If you look at the purchase price allocation, we completed five transactions, it has created a negative goodwill of CHF 1.4 million. In other words, this means that we acquired these five businesses more or less at fair value of the net assets. It highlights our disciplined approach on M&A and our moderate multiples that we have paid on these transactions. You can see also Éolane created a significant negative goodwill of CHF 17 million, MADES, that is a very profitable and a higher profitability than Cicor, created a positive goodwill of CHF 10. In balance, we paid the net asset values.
Now, looking at the past, we have been growing over the last five years, an average 24% year-over-year for five years. We are therefore ahead of our glide path to achieve CHF 1 billion in 2028 and require going forward only 15% in the next years to achieve our midterm objective. In terms of details, M&A contributed 19%, FX was -2%, and organic growth, just above 6%. That, as Alexander already said, is ahead of the market growth of 4%. Overall, we have a solid financial foundation to continue our growth strategy and achieve our midterm goals in 2028. With this, please let me hand over to Alexander for the outlook and closing.
Thank you very much, Peter. Yes. How are we starting into this year, and what do we expect for the year? Our priority, very clearly, is the continued integration of the five acquired companies. It remains a key priority because we want to drive aggressively the benefits like cross-selling, gaining new customers in the markets that we entered, and so on. That remains a priority, even after the normal integration work of most of these transactions has been completed. We expect to return to organic growth.
Overall, markets are expected to return to organic growth in Europe, and we, as Cicor, with the underlying book-to-bill rate of 1.05, that we will definitely, and we expect to definitely return to organic growth, albeit with a slower start to the year and looking at phasing of projects with our customers, the momentum building throughout the year. Margin improvement, operational efficiency is in focus. We are, of course, looking towards the improvement of margins of the acquired business, but also continuing to drive the operational performance of our existing business. Here, specifically said with Éolane, where we are on a positive glide path that should lead us from low to mid-single-digit margin when we acquired the business after integration to a high single-digit margin that we are targeting for the end of this year.
Obviously, the anticipated and continued appreciation of the Swiss franc remains a challenge. We are seeing heavy fluctuations over the past weeks and months, which is not posing a problem for us on a transactional basis because we can manage this through pricing, natural hedging, and the way we are sourcing together with cost measures. However, this does of course, have a translational effect on our results. All in all, we are expecting 2026 sales of CHF 700 million-CHF 750 million and an Adjusted EBITDA of CHF 70 million-CHF 80 million. Which, and this has to be stated specifically these days, assuming stable geopolitical, economic, and financial conditions.
A small remark to the EBITDA here, I circle back to what Peter has said already, that with our largest acquisition in Éolane being on the glide path towards high single-digit margins, the average in the year will obviously still be a bit lower. We will continue on our M&A strategy, but will remain extremely selective and disciplined with relation not only to strategic matters like industrial fit, cultural fit, and so on, but also being extremely disciplined financially. With that, I want to thank you very much and open the forum for questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume of the webcast while asking a question. Anyone with a question may press star and one at this time. Our first question comes from Chiara Di Giammaria from Berenberg. Please go ahead.
Hi. Thank you for the presentation. I have two questions, if I may? The first one is whether you have been or you will be impacted by the memory chip shortage. The second is on your guidance for 2026. You guide for Adjusted EBITDA. Can you remind us if you expect any one-off for the year? Thank you.
Thank you very much for your questions, Chiara. Are we impacted by the memory chip price increase? Yes, we are to a limited extent. The applications that we manufacture are not heavy users or consumers of memory chips. In those instances where we are seeing an impact, we are passing those on to our customers. With a few customers, these discussions are already in process or completed. With our guidance, you have seen that the adjustments were truly made for one-off in M&A. The guidance we are providing is without any additional M&A. Here you would not have to expect big adjustments in this year, obviously, unless there are major M&A projects, which on the other in turn will further increase top line and bottom line.
Thank you.
As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Marta Queralt Ferré from UBS. Please go ahead.
Hi, good morning, and good afternoon, sorry, and thanks for taking my questions. My first question would be on the book-to-bill, please. I mean, I see that it deteriorated in Q4, compared to Q3, slightly. Could you elaborate a bit on what were the drivers of this deterioration and also on what is the visibility that you currently have in the 3 different core markets, please?
Thank you very much, Marti. The book-to-bill rate, it depends very often on larger orders. You have to expect certain fluctuations from quarter to quarter in the book-to-bill rate. The high order intake was primarily driven by orders from the defense sector. I should say, however, that's not all partnerships are immediately turning into orders, and obviously, orders are not turning immediately into sales. We have significant new partnerships and customer relationships and programs one, and these will, over time, turn into purchase orders. Also, in the other markets, the non-aerospace and defense market, we have clearly seen a stabilization. As I mentioned, the industrial sector has seen some organic growth last year already.
Here the worst is clearly behind us, and the cyclical recovery of the industry is beginning. The, the trough of the medical market was a little bit later. Here, please, go back to the fact that we have seen two customers that were very negative in last year and are much more positive this year. We expect positive momentum in all three markets, with the biggest positive momentum being in aerospace and defense.
Okay. Thank you. My second question would be on your EBITDA guidance. I mean, if I take the midpoint of the guidance, I think that the drop through from sales to EBITDA is of around 10%, which seems rather limited to me. My question here, I guess, is, I mean, is this EBITDA guidance mainly impacted by Éolane, or is there also an element of cautiousness given more limited visibility outside defense? One follow-up on the EBITDA, in slide 25, I mean, shall I read this as that excluding Éolane, the 2025 Adjusted EBITDA margin would have been around 12% for the year? Is that right? Thank you.
Let me answer these questions, Marti. Thanks a lot. If I come to your first question, on the slide, the dark blue area is the business of Cicor excluding all 2025 transactions. Obviously, Éolane has the biggest impact, and you're right that the business excluding the 2025 transactions was around 12% EBITDA margin. That may be on the second question, on the clarification on the chart. On the midpoint of the guidance, that is a 10.3%. I think this is what I tried to illustrate with the pie chart, right? Both the light blue as well as the dark blue progress very nice in terms of EBIT margin progression.
Because the carryover, so the full year impact, like the CHF 75 million that you would see between 2025 reported and pro forma comes in, this comes also in at mid-single digit margin and hence drives this margin dilution. That is the driver.
Okay. Thank you. Then, my last question would be on a couple of business points. The first one is in some recent contract wins in the A&D space. Could you give us some color on what are driving these wins here? Then, on medical, you also mentioned that the stocking from medical customers is over. Shall we expect some restocking here, or what are your expectations for this year?
Let me answer the second question first. On the medical side, this was really a massive destocking effort to drive cash flow at our medical customers. Here I do not expect a restocking, but a return to a normal balance between their material procurement and their demands. They have reduced their inventory levels and are now running with those lower inventory levels. In aerospace and defense, I've mentioned that we have seen a broad-based activity where we are winning new customers and new businesses. We have not a single outstanding huge contract, but many contracts that are in the mid to high single-digit CHF million amount.
That's clear. Many thanks.
You're welcome.
The next question comes from Alexander Kinkowitz from mwb research. Please go ahead.
Hi. Thanks for taking the questions. I have one on the defense spending cycle. When do you expect the recent increases in European defense budgets to translate into meaningful production volumes and revenue contributions for Cicor? The second one will be on your M&A pipeline, but maybe first on the defense spending.
Thank you very much, Alexander, for your question. It is indeed one of the important topics and a topic that we have also focused on in our last capital market event end of last year. Indeed, when a customer and large integrator wins a program, it takes several years until the delivery starts. I think everybody knows what is happening for those of you who are in Switzerland or looking at that, where it is said, many year delays, for example, for Patriot deliveries to Switzerland. We are seeing a program is won by one of the major primes, and then it can take three years until they are placing their orders. That is now with us. That is now exactly what happened.
The order intake of the primes has started to increase significantly in 2022. Three years later, in 2025, we see the increase of order intake at our end. Now we are entering that growth phase and revenue is typically then coming one year later. 2022, the first major orders have been issued to defense primes. 2025, orders are reaching us. 2026, delivery of these products starting. You can expect that, what has happened after the start of the Ukraine War and the realization that Europe has to rearm itself is that now we start seeing that translating into business for us.
Maybe a follow-up to that. I think during the acquisition of Mercury, you mentioned that you expect follow-up orders. How is that developing?
That is developing as expected. We are seeing that we have acquired a large order book together with the outsourcing program, and now it's a regular project by project winning of new businesses.
Okay. Thanks. Maybe one on M&A. Could you shed some light on your M&A pipeline? For sure, you have a bit to digest right now. How to think about your pace this year in terms of acquisitions? The second part to this, if I recall it right, you mentioned transportation rail as an interesting field. Any update on that?
Okay. Thank you very much. There's not a specific activity that we have on M&A related to railway infrastructure. We are developing that business very much organically. On M&A pipeline, you will understand that I cannot give any details. It is indeed true that acquisitions are very strategic. On the other hand, opportunities are there when they are there. As we have said multiple times, Peter and I, we are extremely selective on who we want to acquire. That's, having said that, we have to take the opportunity when it arises, especially in environment where we see some of our peers making acquisitions at what we consider inflated prices.
We are taking the opportunity when we have, for example, an exclusive transaction of a company fitting very well that we can acquire at reasonable multiples. It is impossible to provide a schedule here or to have a firm plan. We have, on one hand, to be super strategic, but on the other hand, also a bit opportunistic and act when the opportunity is there.
Fair enough. Thank you.
The next question comes from Bernd Laux from ZKB. Please go ahead.
Thank you. Good afternoon, Peter and Alexander. Let me ask two questions, please. The first one for Peter. Is it correct that you started to use factoring to optimize the working capital? Can you comment on the extent of factoring being used at the end of 2025? The second is probably more for Alexander and related to Éolane. How do you see the year progressing? Are we starting at basically the same profitability level at which you acquired the business, and then towards the fourth quarter, you'll get a hockey stick-like improvement in the profitability? Should that profitability increase then feed through to next year and lead to a clear double-digit EBITDA margin for the acquired French business? Thank you.
Thanks a lot, Bernd, for the good question. I love this one because you already digged into the details, so wonderful. Let me comment on the factoring because I don't think that this should be perceived as a broad-based approach. Éolane has in the past used factoring, and we have with the transaction taken over factoring. You see this one as well in the purchase price allocation. We have taken short-term financial liabilities of CHF 6 million, and we have continued this program, and we have expanded it on a non-recourse basis for the businesses that we didn't acquire in a share deal, but in an asset deal. That is the background. This is what's well-established there.
We just continued running this factor with some smaller adaptations, obviously, because of our scale and our accounting approach. It's not a, it's not a broad-based approach. It's just a continuation of what had been done in Éolane in the past.
Thank you.
On the question of Éolane, Bernd, the business had been loss-making also on EBITDA level before we acquired it out of restructuring and administration. We have reduced headcount by 110 persons mostly in headquarters, where we're seeing far too high SG&A expenses, and that has turned the business positive in June last year and ever since. Now, the question is: How and when do we bring it to our Cicor margins? First of all, we manage the integration, also the operational integration, meaning bringing operational KPIs like quality, on-time delivery to the levels that our customers expect from Cicor. Secondly, we were seeing, and this was faster than expected, we were seeing customers coming back and customers giving us additional orders, very significant orders that are related to French defense programs.
These orders are converted into sales right now, and that is also driving profitability. It's driving profitability together with continued optimization measures on the operational side. You mentioned double-digit margins. Let me be a little bit cautious. I always said we want to come to margins that are approaching Cicor margin at the rest of the business. Obviously, that's something we consider very achievable, and it will provide exceptional value through that transaction.
Okay. Thank you.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Alexander Hagemann for any closing remarks.
Yes, thank you very much. Thanks for your participation in that call and spending the last hour for us. It has been definitely an exciting year. It has been an exciting year on many fronts. You have seen us being very busy and making acquisitions that are creating value. You have seen us not pursuing acquisitions that would not have created sufficient value, and at the same time, focusing on our core strategy that we have explained multiple times. It has been an exciting year, and we are starting into a new year with a lot of optimism based on activity in the market that we are seeing over the past two months. With that, thank you very much.
I hope to see many of you very soon somewhere in the world, and have a great rest of the day. Bye-bye.
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